Friday, June 30, 2006

When Demand Swamps Supply

The Demand measure followed by the Trading Psychology Weblog is an index of the number of stocks displaying significant momentum (bullish/bearish) on a short- and intermediate-term basis. After Thursday's rise on the heels of the Fed news, we had the strongest Demand to Supply reading since the bull market began in late 2002.

When Demand has been extraordinarily high (over 160; N = 12) since October, 2002 (N = 942), the market (SPY) has been up by an average of .78% four days later (11 up, 1 down)--much stronger than the average four-day gain of .16% (518 up, 424 down) for the entire sample.

This fits well with my prior research, which suggests that strong and broad upmoves tend to persist in the near term.

About Me

Author of The Psychology of Trading (Wiley, 2003), Enhancing Trader Performance (Wiley, 2006), The Daily Trading Coach (Wiley, 2009), and Trading Psychology 2.0 (Wiley, 2015) with an interest in using historical patterns in markets to find a trading edge. As a performance coach for portfolio managers and traders at financial organizations, I am also interested in performance enhancement among traders, drawing upon research from expert performers in various fields. I took a leave from blogging starting May, 2010 due to my role at a global macro hedge fund. Blogging resumed in February, 2014, along with regular posting to Twitter and StockTwits (@steenbab). I teach brief therapy as Clinical Associate Professor at SUNY Upstate in Syracuse, with a particular emphasis of solution-focused "therapies for the mentally well". Co-editor of The Art and Science of Brief Psychotherapies (American Psychiatric Press, 2012). I don't offer coaching for individual traders, but welcome questions and comments at steenbab at aol dot com.